New Delhi. People in financial crunch often find it easy to take a personal loan, but this facility sometimes becomes a problem. Over the past few years, thousands of illegal loan apps have been harassing people with exorbitant interest rates, hidden charges and intimidating recovery techniques. Google removed more than 4,700 fake loan apps between 2021 and 2023, but some are still active. These apps attract people by promising to give loans in a short time, but later charge many times the amount from them. Veterans like Nitin Kamat have also highlighted this problem.
Tricks of Illegal Apps: Misuse of Data
In many cases, it was found that these predatory loan apps misused the data present in the phone – photos, contacts and messages. Some apps go to the extent of extorting money from people by morphing their photos and threatening them. This is why giving complete access to the phone to any app is a big risk. Experts say that while taking a personal loan, it is very important to read the user permissions carefully and deny unnecessary access.
hoax of association with bank
Many loan apps promise to be partners of a big bank or a renowned NBFC. These are called ‘Lending Service Provider (LSP)’. But not every LSP is linked to a regulated entity (RE). Trapped in this illusion, people consider illegal apps as real. Therefore, it is important to check the background of any app, its website, partner bank and RBI registration. RBI had proposed to create an official repository of apps in August 2024 so that people can understand the difference between real and fake.
Processing fees and hidden charges
Another hallmark of illegal loan apps is their exorbitant processing charges. Many apps attract people by showing low interest, but charge processing fees of up to 10 percent. For example, if you take a loan of Rs 10,000, Rs 1,000 is deducted upfront, and then interest is charged on the entire amount. This method is completely fraudulent. Therefore, it is very important to understand the processing fees, interest rates and additional charges of any app in advance.
Reviews, Feedbacks and User Experience
Reading reviews on Google Play Store or App Store is the easiest and most important step. Many people write openly about their experiences and problems with apps. Apart from this, advice should also be taken from friends or relatives who have used such apps before. Many times, apps with negative reviews and low ratings prove to be the most risky.
RBI’s new guidelines and secured loan process
RBI issued new guidelines for digital lending in May 2025, in which emphasis has been laid on making the relationship between LSPs and banks/NBFCs transparent. Under this, strict rules have been implemented on underwriting, loan agreement, processing fees and recovery methods. This has provided relief to consumers and helped in curbing illegal apps. Overall, taking a personal loan is not wrong, but choosing the wrong platform can be a big mistake. Therefore, before taking a loan, definitely check the validity, charges and data access of the app. Correct information and vigilance can protect you from fraud.
